Caskey v. Kelly Oil Co.

737 So. 2d 1257, 1999 WL 452125
CourtSupreme Court of Louisiana
DecidedJune 29, 1999
Docket98-C-1193
StatusPublished
Cited by20 cases

This text of 737 So. 2d 1257 (Caskey v. Kelly Oil Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Caskey v. Kelly Oil Co., 737 So. 2d 1257, 1999 WL 452125 (La. 1999).

Opinion

737 So.2d 1257 (1999)

Mattie Connell CASKEY, et al.
v.
KELLY OIL COMPANY, et al.

No. 98-C-1193.

Supreme Court of Louisiana.

June 29, 1999.

*1259 Scott C. Sinclair, Shreveport, Thomas A. Harrell, Baton Rouge, Counsel for Applicant.

James M. Johnson, Donald Frank Bright, Counsel for Respondent.

LEMMON, Justice.[*]

This is an action by the mineral lessors of a 140-acre tract against one of their colessees to enjoin the co-lessee's use of a road on the leased premises and to recover various damages. The issue before this court is whether the co-lessee, under the "adjacent lands" clause in the mineral lease, may improve and use an existing road on the leased premises to conduct mineral operations on adjacent land not owned by the lessors, without having to prove that the lessors will receive some benefit from the co-lessee's use of the road and subject only to the requirement of La.Rev.Stat. 31:11 that the co-lessee exercise its rights with "reasonable regard" for the rights of the lessors.

Facts

In 1972, the three plaintiffs and their predecessors in title granted an oil, gas and mineral lease covering 140 acres in Webster Parish known as the Connell tract. The granting clause of the Connell lease provided, in pertinent part:

Lessor ... hereby grants, leases and lets exclusively unto Lessee for the purposes of investigating, exploring, prospecting, drilling and mining for and producing oil, gas and all other minerals, laying pipe lines, building tanks, power stations, telephone lines, and other structures thereon to produce, save, take care of, treat, transport and own said products and for dredging and maintaining canals, constructing roads and bridges, and building houses for its employees, and, in general, for all appliances, structures, equipment, servitudes and privileges which may be necessary, useful or convenient to or in connection with any operations conducted by Lessee thereon, or on any adjacent lands, the following described land in Webster Parish....

The original lessee assigned a substantial interest in the lease to a company that successfully completed a well on the leased premises. Thereafter, there were further assignments, and at the time of trial all of the lessee's interest was owned by Sonat Exploration and by defendant Kelley Oil Corporation,[1] a co-lessee who owned a 25.66% interest in the lease.

Since the inception of the lease, the colessees and their predecessor lessees, through various operators, have obtained production from wells on the Connell tract. By agreement of the co-lessees, Sonat has acted as operator of the wells on the Connell tract, but Kelley, although a co-lessee, has never acted as operator.

In the 1980s, Kelley's predecessors completed a well on the Seamster tract, which is south of and immediately adjacent to the Connell tract. To gain ingress and egress to drill and to operate the Seamster well, Kelley's predecessors used an existing unimproved north-south road on the Connell tract that had been used by previous operators of the Connell wells.

Kelley became the operator of the Seamster well about 1988. Kelley's personnel began entering the Connell tract through a locked gate on the Connell tract's north boundary and using the same road used by its predecessors to gain ingress and egress to the Seamster well on the adjacent land south of the Connell *1260 tract. Although Kelley's personnel allegedly often neglected to secure the gate, plaintiffs never objected to use of the road by Kelley and its agents to obtain access to the Seamster well.

In the summer of 1996, Kelley, through a contract operator, undertook to drill a well on the Crichton tract, which also is located south of and immediately adjacent to the Connell tract. After investigating and rejecting other potential routes to the well site, Kelley directed its operator for the Crichton well to improve the road on the Connell tract. Thereafter, the operator, without seeking the permission of the lessors, temporarily removed the locked gate, improved the ditches and removed small timber alongside the road, and laid a shale surface over the roadway. As a result of the improvements, a high quality oilfield road now traverses the entire Connell tract in a north-south direction and permits direct access to the Crichton tract.

Plaintiffs filed this action to enjoin Kelley and its contract operator from using the surface of the Connell tract for access to its operations on the Crichton tract and to recover damages. After a hearing, the trial court denied a preliminary injunction, reasoning that Kelley had the right, under the clear and unambiguous "adjacent lands" clause in the Connell lease, to construct roads to further its mineral operations on any adjacent lands. The court further held that Kelley's conduct, although "brash and uncivil," was not unreasonable under Article 11 of the Mineral Code.[2]

Thereafter, the parties submitted the permanent injunction on the record, and the trial court rendered judgment denying the permanent injunction and awarding plaintiffs the stipulated sum of $3,199.25 for the timber damages and damage to the land. The court ruled in favor of defendants on all other claims, including plaintiffs' claim for damages for trespass.

The court of appeal reversed and rendered judgment permanently enjoining defendants and their agents from committing any further acts of trespass on the Connell tract. 30,278 (La.App.2d Cir.2/25/98), 706 So.2d 1102. The court reasoned that Article 122 of the Mineral Code[3] imposes an obligation upon the mineral lessee to operate the leased property for the mutual benefit of the parties to the lease, and while that obligation can be contractually defined, the public policy underlying the obligation cannot be abrogated. 30,278 at p. 5, 706 So.2d at 1105. The court concluded that Kelley failed to prove a benefit accruing to the lessors from Kelley's use of the surface of the leased premises to conduct operations on adjacent lands.

As to reasonableness, the court opined that use of the road by Sonat and its predecessors "set the standard for reasonableness" and that Kelley's conduct, by contrast, was "much more invasive, damaged the premises, and diminished the desirability of the tract for the Connells' future retirement homes." 30,278 at p. 6, 706 So.2d at 1105. Thus the court concluded that while the Connell lease permits a lessee to use the surface of the leased tract for road construction, such use cannot increase the burden on the property unless the conduct is in good faith and for the mutual benefit of the parties. Id. Said the court, "The only `benefit' shown is a high-quality oilfield road where a `pig trail' used to lie; however, this road is unwanted, heavily traveled, and clearly not consistent *1261 with the mineral development of the Connell tract." 30,278 at pp. 6-7, 706 So.2d at 1105-06.

We granted defendants' application for certiorari to consider the correctness of the decision of the court of appeal. 98-1193 (La.6/26/98), 719 So.2d 485.

Applicability of Article 122

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Bluebook (online)
737 So. 2d 1257, 1999 WL 452125, Counsel Stack Legal Research, https://law.counselstack.com/opinion/caskey-v-kelly-oil-co-la-1999.